News

Regulator accuses IPs of using pre-packs to evade liabilities 25 October 2011

The news comes after the Michael O'Higgins, chairman of the TPR raised the issue at last week's National Association of Pension Funds' (NAPF) conference in Manchester.

Speaking at the event, O'Higgins said: "We are concerned that pre-pack insolvencies are being used to offload pension liabilities quickly and cheaply.

"We won't hesitate to use our powers in situations where a weak covenant has been manufactured to offload the scheme."

Taking action

The TPR has already taken court action against Canadian telecommunications firm Nortel to prevent it from offloading pension liabilities through the administration process.

Although Nortel claimed the payment of UK pensions was not an expense of the administration process, Justice Lloyd ruled the liabilities should be classed as one.

Earlier this month, the integrity of some pre-pack insolvencies was called into question.

Employment minister Edward Davey MP told Insolvency Today magazine he wanted to end the "abuse of the procedure".

He said: "Pre-pack insolvencies can offer a flexible and quick rescue, maximising returns and preserving jobs.

"I am regularly told by those who write to me of the disbelief they feel when, having written off a significant debt, they see the same directors running the same business but apparently free from the obligations they had built up. I share those concerns.

"I am very conscious that flexibility can be provided by a properly constructed pre-pack sale.

"I want to stamp out abuse of the procedure – not prevent sales taking place that are in creditors’ best interests."